10/5/02 Dow At 7500- Near 5 Year Low
Being up into the early morning hours this blog will be a bit short today.
Ethan S. Harris, chief economist Lehman Bros, "from the point of view of the average person, we're still in a recession. What the average person cares about is jobs."
President Bush: "there are still too many ppeople who wonder whether or not they're going to find employment."
Senator Sarbanes: "the jobs aren't there right now."
JP Morgan to layoff 4000 investment bankers.
Hiring on hold at temp agencies.
Friday, October 04, 2002
10/4/02 Nasdaq At 6 Year Low
Warnings from Boeing, EMC, Prime Hospitality, Schering Plough, Bank of N.Y., Park Place, and others.
Awful results at Alcoa. Additional layoffs at Verizon and EMC. Terrific results at Starbucks, one of the great ones over the past 10 years.
The 4 week moving average of jobless claims was the highest since the first week in May. For the month there was a decline of 43,000 jobs; however, the government said the unemployment rate declined to 5.6% and that the reason was a decrease in teenager unemployment. I can't even comment on this!
For the very first time there was a delivery of Russian oil into our Strategic Petroleum Reserve.
Only 34% of large companies offer retiree health coverage, down from 66% in 1988. Only 5% of small firms with fewer than 200 workers offer coverage. Benefits are declining. Under existing plans, retirees will pay for 90% of total medical costs by 2031.
The Business Council is an association comprised of CEOs, and they are currently having their half-yearly gathering at the Greenbrier in West Virginia. The chairman is Bill Esprey, the CEO of Sprint. Has Mr. Esprey ever tried getting thru to Sprint's customer service line? He must not value his customers very highly. Another member is Carly Fiorina, CEO of HP. She stated "this is a climate that doesn't reward risk-taking- yet the fundamentals of business are to take prudent risks at the right time." She doesn't get it. Michael Dell does. Dell has entered the server and printer markets. Dell understands risk/reward, and they are eating their competitor's lunch, and that includes HP. Bill Harrison, CEO of JP Morgan Chase, stated that "Business Council members retain a very cautious view of the U.S. economy's near-term growth prospects." I would remain cautious too with Morgan's dismal performance over the last 6 quarters. Scott McNealy, CEO of Sun Microsystems, said "executives had to spend massive amounts of time executing on the rigmarole around Sarbines-Oxley." Rather than wine maybe McNealey should be concentrating on making Sun's servers more price competitive in the current environment. If he did, possibly Sun would not be facing additional layoffs and the stock wouldn't be selling at $2+. Former illustrious Business Council members are Kenneth Lay and Dennis Kozlowski. Maybe receiving an invitation to join the group isn't worth the paper on which it's printed.
Warnings from Boeing, EMC, Prime Hospitality, Schering Plough, Bank of N.Y., Park Place, and others.
Awful results at Alcoa. Additional layoffs at Verizon and EMC. Terrific results at Starbucks, one of the great ones over the past 10 years.
The 4 week moving average of jobless claims was the highest since the first week in May. For the month there was a decline of 43,000 jobs; however, the government said the unemployment rate declined to 5.6% and that the reason was a decrease in teenager unemployment. I can't even comment on this!
For the very first time there was a delivery of Russian oil into our Strategic Petroleum Reserve.
Only 34% of large companies offer retiree health coverage, down from 66% in 1988. Only 5% of small firms with fewer than 200 workers offer coverage. Benefits are declining. Under existing plans, retirees will pay for 90% of total medical costs by 2031.
The Business Council is an association comprised of CEOs, and they are currently having their half-yearly gathering at the Greenbrier in West Virginia. The chairman is Bill Esprey, the CEO of Sprint. Has Mr. Esprey ever tried getting thru to Sprint's customer service line? He must not value his customers very highly. Another member is Carly Fiorina, CEO of HP. She stated "this is a climate that doesn't reward risk-taking- yet the fundamentals of business are to take prudent risks at the right time." She doesn't get it. Michael Dell does. Dell has entered the server and printer markets. Dell understands risk/reward, and they are eating their competitor's lunch, and that includes HP. Bill Harrison, CEO of JP Morgan Chase, stated that "Business Council members retain a very cautious view of the U.S. economy's near-term growth prospects." I would remain cautious too with Morgan's dismal performance over the last 6 quarters. Scott McNealy, CEO of Sun Microsystems, said "executives had to spend massive amounts of time executing on the rigmarole around Sarbines-Oxley." Rather than wine maybe McNealey should be concentrating on making Sun's servers more price competitive in the current environment. If he did, possibly Sun would not be facing additional layoffs and the stock wouldn't be selling at $2+. Former illustrious Business Council members are Kenneth Lay and Dennis Kozlowski. Maybe receiving an invitation to join the group isn't worth the paper on which it's printed.
Thursday, October 03, 2002
10/03/02 Little To Smile About
Cisco's Chambers: "There's little to smile about when it comes to the short-term outlook for Cisco."
CEOs, in a survey, see slower economic growth in the months and year ahead.
Our oil inventories are at a 20 year low.
Tokyo stocks closed at a new 19 year low. Bad loans at Japanese banks continue to weigh on any recovery.
Foreigners cut their net purchases of US corporate bonds to a 7 year low in July. Purchases down 74%.
AMD has a significant revenue warning. Others warning: Dow Chemical, Libbey, and Charter Communications.
After 128 years the Younkers corporate offices are being moved out of Iowa. The new owner, Saks Inc, sacks 270 people.
Analysts continually try and compare this economy with prior economies in hopes the comparisons will provide a reading for future stock market movements. There's one problem. Our economy does not resemble prior periods like 1990 and 1974. Healthcare is now 15% of our GDP. The manufacturing sector represents only 14% of total jobs. Corporate balance sheets have a different look.
We are recovering from the national tragedy of 9/11. The consumer is tapped out financially and emotionally. At this point only 20% of Americans remain without credit cards. Life hangs on a thread- jobs are scarce, jobs have little security, and employers have no visibility. The Fed is powerless to provide a monetary policy which could change the economic landscape. Interest rates have little to fall until they reach zero. As a last resort the Fed might increase the money supply and the dollar will suffer. The world economies are weak. The banking structure in Japan is unstable, and ours is showing cracks too. WalMart, Microsoft, Dell, P&G, Colgate, and a few others cannot carry our economic burdens. Nor can the government. The latter has difficulty just funding medicare, medicaid, and social security.
A significant problem for today's economy is that we have too much of everything (except cash and housing) with too little demand. That creates little pricing power and an emphasis on cost cutting, and the latter usually entails lay-offs. When the majority of Americans have little net savings and depend on the next paycheck, the stability of the system is at risk. It would be prudent to limit comparisons with the past. Enough trillions have been lost to this point.
Cisco's Chambers: "There's little to smile about when it comes to the short-term outlook for Cisco."
CEOs, in a survey, see slower economic growth in the months and year ahead.
Our oil inventories are at a 20 year low.
Tokyo stocks closed at a new 19 year low. Bad loans at Japanese banks continue to weigh on any recovery.
Foreigners cut their net purchases of US corporate bonds to a 7 year low in July. Purchases down 74%.
AMD has a significant revenue warning. Others warning: Dow Chemical, Libbey, and Charter Communications.
After 128 years the Younkers corporate offices are being moved out of Iowa. The new owner, Saks Inc, sacks 270 people.
Analysts continually try and compare this economy with prior economies in hopes the comparisons will provide a reading for future stock market movements. There's one problem. Our economy does not resemble prior periods like 1990 and 1974. Healthcare is now 15% of our GDP. The manufacturing sector represents only 14% of total jobs. Corporate balance sheets have a different look.
We are recovering from the national tragedy of 9/11. The consumer is tapped out financially and emotionally. At this point only 20% of Americans remain without credit cards. Life hangs on a thread- jobs are scarce, jobs have little security, and employers have no visibility. The Fed is powerless to provide a monetary policy which could change the economic landscape. Interest rates have little to fall until they reach zero. As a last resort the Fed might increase the money supply and the dollar will suffer. The world economies are weak. The banking structure in Japan is unstable, and ours is showing cracks too. WalMart, Microsoft, Dell, P&G, Colgate, and a few others cannot carry our economic burdens. Nor can the government. The latter has difficulty just funding medicare, medicaid, and social security.
A significant problem for today's economy is that we have too much of everything (except cash and housing) with too little demand. That creates little pricing power and an emphasis on cost cutting, and the latter usually entails lay-offs. When the majority of Americans have little net savings and depend on the next paycheck, the stability of the system is at risk. It would be prudent to limit comparisons with the past. Enough trillions have been lost to this point.
Wednesday, October 02, 2002
10/02/02 October
It is a month with tricks and treats; however, the average October manages a slight gain in the Dow. Yesterday we started the month with a bang.
These are not average times. Almost all of the S&P 500 companies have a pension deficit; 401K plans have been taking it on the chin; and we have financial institutions who have guaranteed equity returns. Those guarantees are suspect at best. Even with 0 percent financing for 60 months GM's September sales were down 13%. The factory sector weakened for the first time since January, and the ISM Index slipped below 50%.
Then you have the rising spectre of healthcare costs. Medicaid and Medicare cover 75 million Americans with a yearly cost of $400 billion. This cost will rise in 2003, and the numbers covered with an aging population will rise as well. Of course, we also have 41 million Americans without health insurance- 19% of Californians are in this group, and this number is rising annually too.
The times are not average. Building of offices, plants, and stores have hit a 6 year low. At the same time oil has hit a 19 month high at $31 per barrel.
We are experiencing a slowdown in R&D spending, the first such cut since 1960. It is not surprising that this is the first time the venture capital industry has had back to back years of negative returns.
The National Association of Business Economists said the economy would continue to show solid growth. I don't have a masters or a doctorate degree in economics but I know profit skids when I see them. You can listen to the economists or make the trend your friend. There are very few great companies- WalMart, Microsoft, Dell, and some others. Dell just raised revenue forecasts for their upcoming quarter as they increased sales at the expense of other companies. However, until the economic turmoil reverses for the great majority of companies, we will continue in a bear market. The duration is anyone's guess. If I were taking a guess, I'd say the turn is not just around the corner. In fact, it could get worse. It's good to remember that in all months, and not just October, that the market accomodates the fewest number of people at any one time.
It is a month with tricks and treats; however, the average October manages a slight gain in the Dow. Yesterday we started the month with a bang.
These are not average times. Almost all of the S&P 500 companies have a pension deficit; 401K plans have been taking it on the chin; and we have financial institutions who have guaranteed equity returns. Those guarantees are suspect at best. Even with 0 percent financing for 60 months GM's September sales were down 13%. The factory sector weakened for the first time since January, and the ISM Index slipped below 50%.
Then you have the rising spectre of healthcare costs. Medicaid and Medicare cover 75 million Americans with a yearly cost of $400 billion. This cost will rise in 2003, and the numbers covered with an aging population will rise as well. Of course, we also have 41 million Americans without health insurance- 19% of Californians are in this group, and this number is rising annually too.
The times are not average. Building of offices, plants, and stores have hit a 6 year low. At the same time oil has hit a 19 month high at $31 per barrel.
We are experiencing a slowdown in R&D spending, the first such cut since 1960. It is not surprising that this is the first time the venture capital industry has had back to back years of negative returns.
The National Association of Business Economists said the economy would continue to show solid growth. I don't have a masters or a doctorate degree in economics but I know profit skids when I see them. You can listen to the economists or make the trend your friend. There are very few great companies- WalMart, Microsoft, Dell, and some others. Dell just raised revenue forecasts for their upcoming quarter as they increased sales at the expense of other companies. However, until the economic turmoil reverses for the great majority of companies, we will continue in a bear market. The duration is anyone's guess. If I were taking a guess, I'd say the turn is not just around the corner. In fact, it could get worse. It's good to remember that in all months, and not just October, that the market accomodates the fewest number of people at any one time.
Tuesday, October 01, 2002
10/1/02 The Market And The Ozone Layer
The recent experiences of both are astounding. In 2000 the Antarctica ozone hole was 10.5 million square miles. Now it's 6 million square miles, the smallest size since 1988. Warmer temperatures have caused this reduction. We all know where the Dow and the Nasdaq were in 2000, and we just finished the worst quarter since September 1987. A much cooler economy and disappointing profits have reduced equity prices. At this stage it is important to guard against skin cancer and to safeguard your nest egg.
Glenn Hubbard, Chair of the White House Council of Economic Advisors: equity price declines "would not come anywhere close to tipping the economy into recession." I feel so much better. Our tax dollars have created a penetrating mind.
On Sunday I talked about the great ones and what happens to the also rans. Yesterday Target and Federated and JC Penney told investors their September sales would be well below plan. Walgreen missed their numbers. Cirrus Logic, Extreme Networks, and Harmonic also issued warnings for the quarter. Goldman Sachs, Fidelity, and Carpenter Technology all announced layoffs.
The NAPM in Chicago announced their index dropped to 48.1 from 54.9, the first decline since February and the order backlog slid to 40 from 48. The Midwest is having trouble- even with zero per cent auto financing.
The recent experiences of both are astounding. In 2000 the Antarctica ozone hole was 10.5 million square miles. Now it's 6 million square miles, the smallest size since 1988. Warmer temperatures have caused this reduction. We all know where the Dow and the Nasdaq were in 2000, and we just finished the worst quarter since September 1987. A much cooler economy and disappointing profits have reduced equity prices. At this stage it is important to guard against skin cancer and to safeguard your nest egg.
Glenn Hubbard, Chair of the White House Council of Economic Advisors: equity price declines "would not come anywhere close to tipping the economy into recession." I feel so much better. Our tax dollars have created a penetrating mind.
On Sunday I talked about the great ones and what happens to the also rans. Yesterday Target and Federated and JC Penney told investors their September sales would be well below plan. Walgreen missed their numbers. Cirrus Logic, Extreme Networks, and Harmonic also issued warnings for the quarter. Goldman Sachs, Fidelity, and Carpenter Technology all announced layoffs.
The NAPM in Chicago announced their index dropped to 48.1 from 54.9, the first decline since February and the order backlog slid to 40 from 48. The Midwest is having trouble- even with zero per cent auto financing.
Monday, September 30, 2002
9/30/02 The US Consumer
With consumer sentiment down for 4 straight months it would be a mistake to depend on the consumer to bail out our economy. The consumer is barely maintaining a stable environment. That leaves the possibility of business capital investments as a buoy to the economy; however, that appears highly unlikely with growing layoffs, dwindling profit growth, and plant closures. Hopefully no one is looking to the Fed to inflate or for the government to increase spending, and with it, the deficits to mushroom from present levels.
We have had one week of the Fall season. One week doesn't make a season; hoowever, the horizon doesn't have much visibility.
With consumer sentiment down for 4 straight months it would be a mistake to depend on the consumer to bail out our economy. The consumer is barely maintaining a stable environment. That leaves the possibility of business capital investments as a buoy to the economy; however, that appears highly unlikely with growing layoffs, dwindling profit growth, and plant closures. Hopefully no one is looking to the Fed to inflate or for the government to increase spending, and with it, the deficits to mushroom from present levels.
We have had one week of the Fall season. One week doesn't make a season; hoowever, the horizon doesn't have much visibility.
Sunday, September 29, 2002
7/29/02 Keep An Eye On The Great Ones
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
Subscribe to:
Posts (Atom)